The Uncertainty Trade-off: Reexamining Opportunity Costs and War

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Abstract

Conventional wisdom about economic interdependence and international conflict predicts that increasing opportunity costs make war less likely, but some wars occur after costs grow. Why? We develop a model that shows that a nonmonotonic relationship exists between the costs and probability of war when there is uncertainty over resolve. Under these conditions, increasing the costs of an uninformed party's opponent has a second-order effect of exacerbating informational asymmetries about that opponent's willingness to maintain peace. We derive conditions under which war can occur more frequently and empirically showcase the model's implications through a case study of Sino-Indian relations from 1949 to 2007. This finding challenges how scholars traditionally believe economic interdependence mediates incentives to fight: instruments such as trade have competing effects on the probability of war.

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Spaniel, W., & Malone, I. (2019). The Uncertainty Trade-off: Reexamining Opportunity Costs and War. International Studies Quarterly, 63(4), 1025–1034. https://doi.org/10.1093/isq/sqz050

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